Economists’ Topsy-Turvy View of Piracy

Although it was once considered inevitable that unauthorized copying would harm copyright owners, it is now understood that this is not necessarily the case. The concept of indirect appropriability played an important role in shaping this newer understanding. In recent years, however, many economists seem to have taken the message from this new understanding too far, seeing gains to the copyright owners from unauthorized copying in every nook and cranny of the economy, when in reality the instances of such gains are likely to be rather limited. The current literature on this subject, which consists mainly of theoretical models, seems to be badly out of kilter. In this paper I attempt to explain some of the problems and try to provide the outlines of what I believe to be a more balanced and nuanced view of copying. It emphasizes the importance of examining various institutional and behavioral details of individual markets, which are often overlooked by researchers.copyright, indirect appropriability, copying, mp3, downloads

The Oberholzer-Gee/Strumpf File-Sharing Instrument Fails the Laugh Test

I examine the key instrument (German kids on vacation) used by Professors Oberholzer-Gee and Strumpf. Their measured relationship between the instrument and the variable that it is instrumenting for, American downloading, is seen to have outlandish implications, indicating an important error. The instrument is also shown to be related to American record sales, contrary to the requirements of their analysis. The data set used by O/S is biased, considerably overstating the share of German files. Finally, I demonstrate that the instrument must have a de minimus impact on American downloading (and thus American record sales) negating its potential usefulness and implying that their approach could never have worked.

Economists Examine File-Sharing and Music Sales

The decline in sales of music CDs and the recording industry’s attempts to reverse the decline have been much in the news over the last few years. Since this decline began at the same time that file-sharing became popular, and since file-sharing would be expected to lead to a decline in sales, file-sharing is the leading candidate among possible causes of this decline. At the center of the file-sharing debate is the empirical issue of whether or not file-sharing decreases sales. In this paper I examine the different empirical methodologies that have been chosen by economists studying this issue. The studies use different methodologies but nevertheless find, almost unanimously, that file- sharing has led to a serious decline in record sales, except for one highly publicized study that reaches very different, and in my opinion, highly implausible conclusions.mp3, filesharing, music, downloading, napster

Seventeen Famous Economists Weigh in on Copyright: The Role of Theory, Empirics, and Network Effects

The case of Eldred v. Ashcroft, which sought to have the Copyright Term Extension Act (CTEA, aka Sonny Bono Copyright Act) declared unconstitutional, was recently decided by the Supreme Court. A remarkable group of seventeen economists including five Noble laureates, representing a wide spectrum of opinion in economics, submitted an amicus curie brief in support of Eldred. The economists condemned CTEA on the grounds that the revenues earned during the extension are so heavily discounted that they have almost no value, while the extended protection of aged works creates immediate monopoly deadweight losses and increases the costs of creating new derivative works. More important, we believe, than the particulars of this case, is the articulation of the economic issues involved in copyright extension. These issues are not fully developed in the brief, nor is the case as one sided as the Eldred economists claimed. First, private ownership of creative works may internalize potentially important externalities with respect to the use of existing works and the creation of derivative works. Second, the Eldred economists neglect the elasticity of the supply of creative works in their analysis, focusing instead solely on the benefits received by authors. Consequently, they may underestimate the potential for additional creativity, which confers benefits immediately. Third, the Eldred economists neglect certain features of copyright law, such as fair use, the distinction between idea and expression, and the parody exemption, which mitigate the costs of copyright. Finally, we present data that counters a common claim that copyright extension so far out in the future can have little effect on creativity. The small fraction of books that have the majority of commercial value when they are new appear to remain valuable for periods of time that are consistent with the expanded term of copyright under CTEA.Technology and Industry

SEVENTEEN FAMOUS ECONOMISTS WEIGH IN ON COPYRIGHT: THE ROLE OF THEORY, EMPIRICS, AND NETWORK EFFECTS

In 2002, seventeen economists including five Nobel Laureates presented an amicus curiae brief discussing the economics of copyright extension in support of the petitioners in Eldred v. Ashcroft. The economists’ amicus brief was unusual in several respects, not least in that it brought together a group of economists almost as notable for its diversity of opinion (spanning the ideological spectrum from Kenneth Arrow to Milton Friedman) as for its academic distinction. When such a distinguished and broad panel of economists readers would have every reason to believe that the arguments set forth in this document are sound down to the smallest details. Yet this is not the case. Scholars in the fields of law and economics will continue to address the economics of copyright duration in the foreseeable future, so it is important that they understand the imperfections in the economists’ brief. This Article provides a counterweight to the amicus brief, identifying some points the economists ignored, clarifying some discussions they did not quite get right, and providing data that runs counter to some assumptions they made.Eldred, coypright, sonny bono, lessig

Seventeen Famous Economists Weigh in on Copyright: The Role of Theory, Empirics, and Network Effects

The case of Eldred v. Ashcroft, which sought to have the Copyright Term Extension Act (CTEA, aka Sonny Bono Copyright Act) declared unconstitutional, was recently decided by the Supreme Court. A remarkable group of seventeen economists including five Noble laureates, representing a wide spectrum of opinion in economics, submitted an amicus curie brief in support of Eldred. The economists condemned CTEA on the grounds that the revenues earned during the extension are so heavily discounted that they have almost no value, while the extended protection of aged works creates immediate monopoly deadweight losses and increases the costs of creating new derivative works. More important, we believe, than the particulars of this case, is the articulation of the economic issues involved in copyright extension. These issues are not fully developed in the brief, nor is the case as one sided as the Eldred economists claimed. First, private ownership of creative works may internalize potentially important externalities with respect to the use of existing works and the creation of derivative works. Second, the Eldred economists neglect the elasticity of the supply of creative works in their analysis, focusing instead solely on the benefits received by authors. Consequently, they may underestimate the potential for additional creativity, which confers benefits immediately. Third, the Eldred economists neglect certain features of copyright law, such as fair use, the distinction between idea and expression, and the parody exemption, which mitigate the costs of copyright. Finally, we present data that counters a common claim that copyright extension so far out in the future can have little effect on creativity. The small fraction of books that have the majority of commercial value when they are new appear to remain valuable for periods of time that are consistent with the expanded term of copyright under CTEA